ProKidney Corp. (PROK) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the Morgan Stanley Global Healthcare Research Conference. I'm Judah Frommer. I'm one of the smid-cap biotech analysts here at Morgan Stanley. We're just going to start out with a brief disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. We're excited to kick the conference off in this track with ProKidney, and I'm excited to welcome Bruce and James to the stage. So thanks for being here, guys. It's been an exciting year for ProKidney. But before we dive in, maybe you could provide a quick intro to the company for those who may be less familiar. And kind of talk about the unmet need you're addressing in chronic kidney disease.

Sure. So first, Judah, thanks to you and Morgan Stanley for inviting us. We're happy to be here kicking it off this morning. So ProKidney is a company that's headquartered in Winston-Salem and Boston. We have an autologous cell therapy. It's called rilparencel. Rilparencel is intended to keep people who have advanced chronic kidney disease off dialysis. We have an employee base of about 250 people. We went public in 2022. And we're currently in a Phase III study, which we'll talk about in a few minutes.

Okay. Great. So speaking of that Phase III study, there have been some changes to the Phase III program for rilparencel. Since it began, most recently, you announced alignment with FDA on an accelerated path based on eGFR slope. Can you give us an overview of the Phase III program, how the accelerated portion came about? And was there data from the program that informed that discussion with FDA?

So just briefly, our Phase III study, it's one study. It's called PROACT 1. It's a randomized sham-controlled, multicenter, primarily U.S., but also some sites in Mexico and Taiwan. When the study was designed, it was originally designed and still remains, in some ways, a time to composite event study. And I know we'll get into some of the composite events in a few minutes. But I do want to highlight that this is a substantial study for cell therapy. And our target goal in order for us to achieve 122 events, which was our target, our target sample size was over 600 patients. And for a cell therapy, that is quite significant. And that's because we're dealing with a potential indication where we're treating patients with advanced CKD, and that's not a rare condition. And we'll talk about the size of the market, but it is substantial. And given the substantial size of that population, the expectation is that we deliver a Phase III program with a time to composite event study. Now over the last year, we've made some really substantial strides in our discussions with the FDA. We had a meeting with the FDA in October of last year where we asked them about accelerated approval process. We have an RMAT designation going back to the fall of 2021, which gives us some more regulatory flexibility. And our discussion with the FDA last October, our face-to-face meeting with the FDA went really well. We left that meeting with some direction that we would qualify for an accelerated approval process and to get back to the FDA with more better description of what that would look like and what our statistical plan would look like. So we actually went back to the FDA in mid-July, where we spoke to them specifically around using eGFR slope for accelerated approval, and they agreed. They agreed with our approach to how we think about the analysis. We continue to have a little bit back and forth on what that SAP exactly looks like. But at least from a conceptual perspective, big point perspective, we have full alignment on what that's going to look like. And so eGFR slope, that has a big impact then on how we think about timing. The same study will be used for the confirmatory analysis. But by May second quarter 2027, we should have a top line readout on eGFR slope in the sham control group versus the interventional group, and that should give us an idea then, if we can move forward with the BLA submission.

Okay. Great. And FDA did provide an effect size that would be an acceptable demonstration of efficacy. So maybe you can talk to that effect size that was discussed. And can you help contextualize the effect size in terms of both natural course of CKD and what we saw in your recent top line Phase II results?

Sure. So there's a lot there. So bring me back at the end, Judah, if I don't answer some of this. So just from an effect size perspective, we actually went to the FDA with what we thought was an important effect size. And so as we thought about that effect size, which the FDA agreed with being a difference in the 2 arms of at least 1.5 ml per minute. Part of our thinking behind that is that this is a cell therapy. And the data that we had internally suggested that we should be able to hit that mark. But it's also important from a commercial perspective that there needs to be a meaningful difference. And we felt that 1.5 ml per minute per year would be a meaningful difference. And the context behind that is that if you look at some of the SGLT2 data, their difference between the intervention group and the placebo group is -- in several of the SGLT2 trials is less than 1 ml per minute per year. So we're actually targeting something that's 50% greater than that, which we felt to be clinically meaningful and potentially meaningful to keep patients off dialysis. So that's where the 1.5 actually came in. Now to put that a little bit more context, around what happens to patients and their sort of maybe the natural history of progression, you could look at general population data, which doesn't have a lot of more advanced patients with chronic kidney disease or you can also look at some of the more recent randomized controlled studies using GLP-1 agonist, for example, or SGLT2s. And the progression in the placebo-treated groups is typically on the range of 3, maybe a little bit worse than 3 ml per minute per year. So that's what we're expecting in our placebo group and that 1.5 ml per minute difference is we're also anticipating then in the treated group, something around that decline on an annual basis. In our Phase II study, which we released the top line results in July of this year, we actually saw -- in Group 1, which is the more meaningful group for us when we think about the data, we actually saw in the pretreatment period, a decline of minus 5.8. And then we saw after treatment, a decline of minus 1.3. So a substantial difference, a difference that certainly exceeded my expectations. And so we -- if anything, based upon that data, one could argue that our effect size and sample size expectations for accelerated approval are somewhat conservative, but I'd rather be on the conservative side than miss something that we shouldn't have missed.

Okay. That makes sense. Now given all kind of the changes in time lines with the program, how does the accelerated path change the development time lines generally for the program? Can you kind of give us an idea of what you were expecting maybe a year ago, like you said, versus -- you mentioned the potential readout in May of '27, but how did those time lines shift?

So our previous guidance around confirmatory -- our confirmatory readout had been, I think, Q3 or Q4 of 2027. I think that was our previous guidance. That was before we really kicked off a restart to our Phase III program. And we've halted that guidance, and we'll issue some new guidance on that moving into next year. So what we've done is essentially pulled the goalposts in. And the previous goalposts were being impacted by once we restarted the clinical study and some delays in getting sites up and running and patients enrolled. So in essence, we've pulled the goalposts in, and we've given ourselves not just a -- we need to wait for events because that's not the case anymore. Now we're at a point where we feel really confident that based upon our existing enrollment that we're going to hit Q2 2027 for that readout.

Okay. And speaking of enrollment, I think you said you were nearly half enrolled in your July update. Can you talk about powering assumptions for readout in second quarter of '27? Has anything changed there? Or maybe just some more detail you could help us with?

So nothing has changed for the bad. I mean we're doing really well on enrollment. So we're actually over 50% enrolled for what we expect our sample size to be for accelerated approval. And we think that's going to land somewhere around 350 subjects with at least 6 months of follow-up. And the effect size we talked about was a difference of 1.5 ml per minute between the 2 groups, and we're powered at 90%. So we -- again, we wanted to not end up with a false negative, if you like. We wanted to be pretty comfortable when we actually open the envelope. And -- so that's why we decided to go with 90% power. We did look at different power assumptions. They would have saved us some sample size numbers, maybe would have given us a readout a quarter before Q2 or something like that. But in the big scheme of things, it really wasn't worth taking that risk.

Okay. And a couple of years ago, you modified the enrollment criteria for PROACT 1 to focus on highest-risk CKD patients. Can you remind us why that decision was made and how big the market opportunity is in these high-risk patients?

Sure. So just as a reminder, original design of PROACT 1, I'll talk about in GFR terms -- not in albuminuria terms, but in eGFR terms, the original design was 20 to 50. When we looked at the data from 002, which was another Phase II study, we saw what we thought was a signal in patients who had the highest risk of CKD -- highest risk of kidney failure with a GFR that's around 30 or less and a high albuminuria, high UACR. And so based upon -- partially based upon that information, we used the downtime in our clinical study to amend the protocol to now focus on those higher-risk patients. But there's a little bit more to that. There's more of a nuanced answer. And the nuanced answer is, quite honestly, that we see a market where patients are going to be on standard of care. There's been really substantial advances in how we treat patients with diabetic chronic kidney disease. And we think we'll be in a position where some patients -- a lot of these patients continue to progress, but they're going to be tried on ACE inhibitors or ARBs and GLP-1 agonists and SGLT2s and maybe other things. But there's always going to be -- we believe there's no cure patients that progress. And so we see this as like an add-on to standard of care. It's also at a time when -- if you look at patients with more advanced kidney disease, it's a time when they get referred to a nephrologist, who will be the physicians that we'll be calling upon. They get referred to nephrologists. They're not managed solely by internists and endocrinologists and others at that point in time. It becomes more meaningful for them at that point because they're hearing the word dialysis. And then finally, although this doesn't -- this shouldn't drive clinical study design, it's also -- once you reach that stage 4 CKD population, it's where payers start to recognize that this is a population that we need to pay attention to, and they're more open to newer therapies.

Okay. If the accelerator readout is positive, what's the read-through for the confirmatory portion of the study? And the confirmatory primary endpoint is a composite time to event, of which eGFR is a component. So we do get the question on how do we connect kind of those. Yes.

Yes. So it's a great question. So just on a timing perspective, we would -- by the time we do -- we have the accelerated approval readout, we expect our -- we expect enrollment to be complete for the full study. We expect most, maybe all patients who have already been treated. So then it's a matter of just following those patients for their events -- their clinical events. And the composite endpoint is dialysis, first to -- it's first to dialysis, first to transplantation, renal or cardiovascular death, and we have an adjudication committee that helps us with that or a 40% loss in eGFR. And that's the tie-in, right? So that's the tie-in with our accelerated approval. But accelerated approval, eGFR slope also ties into transplant, also ties in easily to dialysis and also ties into renal or cardiovascular death because loss of kidney function is so closely associated with cardiovascular death in particular. So there's actually a very neat tie-in to say that if we see a difference in eGFR slope, we feel confident that we'll hit those endpoints as well.

Okay. Great. And maybe just a quick follow-up on that. From clinicians' perspective, kind of tying the accelerated endpoint to the time to event endpoint, I guess what's been response on the connection from that?

We actually haven't heard too much from clinicians on that, to be honest. The nephrologists that we -- most of our PIs are the ones that we work with directly. Most of them are nephrologists and most of them have really -- the eGFR slope accelerated approval, in some ways, just feels natural to them, right? So I don't think they actually see this as a big query at this point.

Okay. Great. We did briefly touch on the top line Phase II REGEN-007 data that you reported out earlier this year. Are there any other takeaways from that study you'd highlight? You've also guided to presenting full results at ASN Kidney Week later this year. So what can we expect from that update?

So additional information. So I think there's one thing that we've highlighted in our press release, and I'll highlight here, too, and that is in Group 1, the reason why we're so focused on Group 1 and others have been too is the design of Group 1. The treatment schedule in Group 1 is the same as we have in our Phase III program, right? So a patient gets a biopsy, we take those cells and make a product. We -- for those that are randomized to the intervention group, we inject one kidney and then 3 months later we inject the other kidney. That's the same as Group 1 in REGEN-007. And of the 24 people that were treated in 007 in Group 1, I think it was 16 -- 15 or 16 -- I think it was 16 subjects who had the key eligibility criteria for Phase III. We haven't revealed what those results were in that group. But I can tell you, there's no difference between that group and the overall Group 1. If anything, it looks tiny bit better. So that's sort of one key piece of information. Then we've been careful because of the embargo that we haven't been able to reveal -- release all of the information from REGEN-007. Happy to say that we submitted our late-breaking trial abstract last week. We submitted our manuscript last week. So now it's in the hands of the reviewers, and we'll see what happens.

Okay. Great. Looking forward to that. We're also expecting more data related to rilparencel's mechanism later this year. What could we learn from that update? I guess what are you hoping to show from that update? And could there be any bearing on regulatory or commercial implications?

Sure. That's a great question. So MOA -- at the end of the day, if we have a positive Phase III program, MOA becomes more of an interesting scientific question, right? People still want to know, right? And we want to be able to really describe, have a great narrative on how our product works. But I will say that I don't expect a eureka moment. I don't think there's going to be one piece of data that we look at that says, wow, this is it, waiting for this for 10 years. So -- but I will say that we've got a pretty broad program now looking at our MOA using most of the very advanced tools available to say that we didn't have 10 years ago, but the teams didn't have 10 years ago. With regards to ASN, I don't expect eureka disclosure either at ASN. It's more of an incremental story. But I will tell you that there's a partnership, a collaboration that we have with NYU Langone. And they're co-presenting a study description with us. And I think most people will find this quite interesting and maybe a very novel way of looking at MOA.

Okay. Great. Maybe we move to commercial a little bit. So within the commercial context, how do you see rilparencel competing with the therapeutic options you mentioned, right, SGLT2s, GLP-1s? And do these agents limit the addressable opportunity for ProKidney? Or is it more of a slotting issue kind of where are you sitting within there?

So I can speak to how the FDA thinks of this, and we're very much aligned with it. This is one of our discussion points with the FDA back in July, was the FDA expects the patients to get treated in both arms of the study with standard of care, right? Now we and the FDA also believe that not everyone will either tolerate standard of care, may have some side effects or may be contraindications to ACE inhibitors or ARBs or SGLT2s or GLP-1 agonist. So we believe that our therapy is going to be on top of standard of care, which makes sense for those patients that end up with a GFR less than 35 despite best efforts of nephrologist and despite best efforts of patient compliance, et cetera, et cetera. So that's where we think we'll end up. And honestly, that market -- James can talk about the size of that market, too. That market is still going to be, I believe, will create a demand that's much bigger than our ability to supply it. Do you want to talk about the size of the market for a second, James?

Sure. When you think about Stage IV CKD patients in IIb with high UACR, we're looking at a little over 1 million patients. And you factor in diabetics to that, we're closer to about 500,000 patients. Bruce also mentioned our ability to manufacture. We have our own manufacturing capabilities in North Carolina, capable of manufacturing for our Phase III program and also capable of manufacturing for our commercial launch. We're currently expanding into, again, our own facility and have the ability to continue to expand to meet ramp as we continue to grow as a commercial company.

Okay. Have you had FDA interactions in terms of inspections of that facility thus far? Or is that kind of going to be back-end weighted?

So we submitted and received a favorable Type C response for the manufacturing expansion facility.

Okay. Great. And then just kind of on the same topic, longer term in terms of the addressable population, do you see potential to move into earlier lower-risk CKD populations? Or do you feel like you found the appropriate population for rilparencel with this study?

So that's a really common question people are interested in that because we started out, as we said earlier, right, sort of in an earlier phase of CKD. My general take on it is that, look, we think it works in earlier stage 2, but there's just so much else that's going on with those patients. And kidney disease is not necessarily top of priority for them or their physicians. And it's probably less important for payers as well. So we could, but I don't think -- I honestly think just given the demand in the population that we're targeting today, that will be sufficient for us moving forward.

Okay. That makes sense. And then maybe last line of questions in this question list before we get to a new survey we're doing this year. But can you remind us of cash runway? I think your last guidance was funding just beyond the accelerated readout for PROACT 1, but I know you mentioned there could be some updated communication around it.

No, that's exactly right. As of end of June, we had $295 million of cash that takes us to mid-2027. What's important about that date is we have Phase III data and accelerated approval in the second quarter. So we do have cash to Phase III data.

Okay. Perfect. And maybe just remind people, James, like how that component of the narrative has changed over the last year, right? This was a story where the Phase III was being run and the readout was beyond the cash runway. Was there anything done beyond changes to the study to kind of pull cash runway beyond the Phase III accelerated readout? Anything else done on the cost side? Or is it really just the study changing?

Not specifically on the cost side, no. We've always been opportunistic about raising additional capital. We've got an ATM that we can utilize as needed, and then we're certainly again, opportunistic around raising additional capital and bringing additional capital into the company. But other than being very, very cautious with how we spend our cash, nothing specific on the cost side.

Okay. So it feels like forever ago, though, where we raised $140 million, but it was June of 2024. So it wasn't that long ago, but it feels like a long time ago. The other thing I'll add to that is -- and because this was a big change in strategic direction for us, we stopped the other Phase III study. There was a study called PROACT 2, and we stopped it because we didn't need it. And this was because we really focused on ensuring we use the RMAT to its greatest capabilities and working on a relationship with the FDA. So that saved us, I don't know, $150 million, $175 million.

That's right.

Yes. So that -- I mean that -- and the accelerated approval, that really made a big difference in how we think about our company and the money that we need to get to a readout.

Okay. Perfect. That's a good update. And then maybe just switching to -- this is something we're doing that's new this year. We're trying to ask all of the companies at the conference, I would say, some topical thematic questions that can hopefully generate kind of a broad survey across biotech. So the way that we're framing this is that biotech does seem to be more exposed to external and macro factors of late. We can agree or disagree on that. So we're going to ask kind of 3 related questions. The first is related to China's rise in biotech innovation. So how are you thinking about competitive position here? Is there any influence on your R&D or your business development strategy thinking?

So James and I are going to tag team on some of these, but James, feel free to jump in. So first, I think we're all witnessing some real advances in the biotech industry in China, right? So there's a lot of noise, definitely a lot of news, a lot of -- many analysts are covering what's going on in China. What we see from a sort of regenerative medicine, cell therapy, gene therapy perspective, they've made some big investments, and they seem to be making a lot of advances for us. We don't see a real competitive threat at this point, but we see what they're doing is more of a validation of the cell and gene therapy space. And sort of the innovation that we're bringing to the table and others are bringing to the table, I think it just -- sort of just tells us that the decisions we've made are the right decisions, and we're seeing that sort of in China today. From a sort of a business strategic position, we're happy with where we are with regards to our product. We think we're really well protected from an IP perspective, especially in the markets that we plan to commercialize in. With that said, we will keep a close eye on what's going on in China. And if we think there's the right opportunity that comes up for business development, commercialization activities or other, then we will certainly enter -- think about that in more detail. But at this point in time, our interactions with China are pretty limited.

Okay. Helpful.

Yes. Maybe just to add that right now, we have very limited exposure to China. We do -- as I mentioned, we do all of our own manufacturing in North Carolina, primarily sourced from the U.S. And as Bruce mentioned, certainly protected by our IP.

Okay. Great. Next topic is AI. I guess, anything you can say about how you're leveraging AI or thinking about potential disruption from AI. So I think kind of both sides of the AI coin.

So I'll say that -- I'll start with just by saying, look, I'm not sure we're just throwing everything into AI. We're not doing that. So where it makes sense, we will. So for example, and I think everyone is doing this, we use AI for some of our administrative tasks. We're using AI in our cybersecurity, right? So our Head of IT or Head of Cybersecurity uses AI to look for sort of anomalous data that's coming up to help protect our IP, to help protect our R&D investments and things like that. And I think that's -- there's opportunities, I would say, more on the commercial side as we get closer to that for using AI into our commercial operations. Any else?

Regulatory, administrative functions? Yes.

Yes. I mean just on the regulatory piece, we also just need to be super careful around any AI we use on regulatory or within clinical trials because the FDA also is a little bit concerned around some of that. And so wherever we go in using AI on the regulatory side, we're just super cautious about how we do that as well.

Got it. Okay. And last topic is the regulatory side of things. So whether it's changes at FDA, how you're thinking about pricing product eventually in the commercial setting, tariffs, I guess, anything from the regulatory side of things that is keeping up at night, is commanding more attention than you thought it would currently? Or do you feel like you're relatively insulated from the headlines?

So I would say I might stay awake at night for things that are, broadly speaking, going on in the broad regulatory policy landscape. I mean, it's fascinating times. But I'll say that we're pretty well insulated. So we've got an RMAT. We've got a good relationship with our FDA reviewers. James, if you want to speak about tariffs for a second because I know that's something that you think about, too?

Yes. I mean we've had very limited impact of tariffs other than potentially some impact on the manufacturing build-out of some of the materials that we're sourcing for the manufacturing build-out. Other than that, again, our operations are primarily sourced from the U.S. And so we've had a very minimal impact, I think, comparatively speaking, from tariffs.

Okay. All right. That's super helpful. Let me just poll to see if there are any questions in the room. And if not, I think we'll call there, but thank you for a very informative discussion.

Thank you.

Thank you, Judah.